Political Economy Watch

B-BBEE “works” but not for the poor or stability

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In South Africa’s highly politicised society, socio-economic issues often get dangerously oversimplified, leading to bad, at times counterproductive, policy choices.

Nothing illustrates this better than two very recent research reports – one on the country’s economic environment and the other on the political environment.

The 2016 New World Wealth (NWW) report, based on research during the period 2014/15, has found that 45% of SA’s dollar millionaires are black, coloured, Indian or Chinese – groups unable to vote prior to 1994. This represents a substantial improvement on only 14% in 2007.

In actual figures it means that at the end of 2015, of the approximately 38 500 so-called High Net Worth Individuals (HNWI) – those with a net value of R14.5 million or more – well more than 17 300 are from previously disadvantaged groups.

Overall, in the African context, South Africa is also doing well in the HNWI league, with by far the largest HNWI market on the continent – just short of 25% and twice as many as any other country in Africa.

In the view of New World Wealth, the SA government will continue to push Broad- Based Black Economic Empowerment (B-BBEE) policies until previously disadvantaged groups make up at least 80% of SA’s dollar millionaires. The goal is expected to be reached by 2030.

Aims of the programme

In the words of the Economic Development Department (EDD) on its website, in a long-winded sentence of no less than 73 words, the aims of B-BBEE are:

  • To ensure that the economy is structured and transformed to enable the meaningful participation of the majority of its citizens;
  • To further create capacity within the broader economic landscape at all levels through skills development, employment equity, socio-economic development, preferential procurement, enterprise development, especially small and medium enterprises;
  • To promote the entry of black entrepreneurs into the mainstream of economic activity, and the advancement of cooperatives;
  • To implement B-BBEE in an effective and sustainable manner in order to unleash and harness the full potential of black people; and
  • To foster the objectives of a pro-employment developmental growth path.

The purpose of the programme is then summarised as “to develop and reshape policies to give greater effect to these objectives. In doing so, EDD will work in close co-operation with the DTI (Department of Trade and Industry), who will drive the implementation of these polices, and other departments involved in B-BBEE processes.”

Judged on the figures revealed by the NWW report the government seems to have made considerable progress with its B-BBEE programme and would have picked up much kudos amongst the population with it.

Reality check

The starkest reality check on the expectation of political capital gain, however, came from an survey by Afrobarometer published late last month which, among other things, found that fewer South Africans believe that life has improved since 1994, against those who believe that life was better before the ANC government took over.

It found that a majority of South Africans believe that the country has failed to advance on a range of socio-economic indicators, including personal safety, economic circumstances, employment opportunities (key B-BBEE aims), racial relations, and disparities between rich and poor.

Tellingly only 17% perceive an improvement in differences between the rich and the poor.

And, as another report from NWW last year revealed, South Africa has also not escaped the Africa-wide trend that the rich get richer even as poverty and inequality deepens. That report also had strong criticism of development programmes.

In the meantime, violent protests about real or perceived service delivery are on a constant upward curve. At the same time another Afrobarometer report has found that minority groups (whites, coloureds and Indians) are increasingly feeling discriminated against.

All of these, combined with increasing radical political rhetoric, are adding up to increasing polarisation among the broader community.

Broader perspective

While various interest groups and political parties use reports like those mentioned to put their own spin on things, it is important for a full perspective to keep in mind that:

  • The concentration of wealth in the hands of a shrinking percentage of the population is a worldwide phenomenon. An Oxfam report earlier this year found that the richest 1% of people on earth now has more wealth than the rest of the world’s population combined;
  • In line with what has happened in the rest of the world, the total number of HNWIs in the country has actually shrunk by 10% since 2007;
  •  Growth (in HWIs numbers, like growth in the economy) was negatively influenced by a significant depreciation of the rand against the US dollar, falling equity markets and the migration of a significant number of HNWIs out of the country;
  • Growth is constrained by the current electricity crisis and the rising level of government regulation in the business sector, hampering its own aims as spelled out as (also) part of the B-BBEE programme;
  • As indicated in another article this week, the potential of the urbanisation process as an economic growth driver, is totally underestimated;
  • The complexity and lack of focus of the country’s anchor policy for economic and social development, the National Development Plan, is hampering properly targeted development efforts;
  • On the global market South Africa’s needs, like many other developing countries are in many respects in conflict with those of developed countries. Europe for instance, for its own growth, needs not only low prices for natural resources from developing countries, but also exports to them; and
  • Managing the expectations of the majority of the population post-liberation in 1994 remains a huge challenge.

To this can be added narrow ideological agendas constantly punted from hard-core Marxists to unbridled free market disciples and every shade in between.

More than ever the country needs leadership that can unite the nation behind a mixed, sophisticated approach to both the economic and social policy programmes through stormy domestic and global times ahead as the existing order comes under increasing pressure on many fronts – from political to financial structures.

by Piet Coetzer

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